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Rick Aristotle Munarriz has been a Motley Fool contributor since 1995, specializing in tech and consumer stocks. He's been part of the analyst team for the Motley Fool Rule Breakers newsletter service since its 2004 launch, serving as portfolio lead for the real-money Motley Fool Supernova service since its 2012 debut. Beyond amassing close to 20,000 bylines in that time, Rick still finds the time to tend to his collection of travel and entertainment websites through Siteclopedia.com and perform improvisational comedy at Miami's Just The Funny.
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Al Grillo/AP
Best Buy came out of nowhere to become one of last year's biggest winners. The consumer electronics retailer soared 237 percent, but investors hoping for a repeat performance in 2014 will likely be in for a rude awakening.

Let's go over a few reasons why Best Buy (BBY) stock could go from hero to zero this year.

1. Growth is going the wrong way. Stocks that more than triple in a year are often on a growth tear, but that's certainly not the case with Best Buy. Analysts see revenue and earnings per share declining 7 percent and 13 percent in the fiscal year that ends later this month.

Best Buy started to bounce back when it became clear that the superstore chain wasn't going away. However, fundamentally speaking it has just now started to bottom out.

2. Consumer electronics may never be the same. Best Buy may be selling a fair number of smartphones and tablets, but what happens after that? Unlike the PCs, TVs and CD players that used to define Best Buy's business a few years ago with a steady diet of software discs, DVDs and CDs, today's hot devices feed into digital ecosystems that bypass Best Buy completely.

Best Buy likely held up better than that, but it's still a trend that doesn't bode well for the retailers of consumer electronics and physical media items.

3. This is no longer a juicy dividend play. Best Buy's quarterly payout of 17 cents a share was a major attraction when the stock closed out 2012 at $11.85.

It was a fat 5.7 percent yield, making it a compelling stock for income investors betting on the chain's survival.

The quarterly dividend remains the same, but with the stock closing out 2013 at $39.88 the yield for new investors drops all the way down to 1.7 percent. When you consider that interest rates inched higher through 2013 it makes Best Buy less attractive.

4. Best Buy is no longer cheap. The days of Best Buy trading at an earnings multiple in the mid-single digits are toast. The stock kicked off 2014 fetching 16 times this fiscal year's projected profitability and 14 times the profit target for the new fiscal year that begins next month.

That's not an outrageous multiple, but it's not as if Best Buy is growing its sales again. Wall Street is braced for flat revenue growth in the year ahead, and since that follows a double-digit decline over the past year we're talking about a chain that still won't be where it was two years ago in terms of total sales.

5. Sector rotation cuts both ways. Investors poured into consumer electronics retailers early last year. It wasn't just Best Buy. Conn's (CONN) more than doubled, and HHGregg nearly doubled in 2013.

The market raced into these retailers after Best Buy's new CEO showed a commitment to cutting costs and all three chains saw healthy upticks in their appliances and home products sales as the housing boom took off. Conn's and HHGregg are more appliance-centric than Best Buy, but it was still a good reason to buy into the chains that were delivering new fridges and mounting microwave ovens in new digs.

The climate is clearly starting to move away from this retailing niche in 2014. Sector rotation may not seem fair when the herd is moving out of your stocks, but the rally of 2013 for Best Buy and its smaller peers was never fully justified.

It's going to be a long year for Best Buy.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

A big, bold "SALE" sign helps get people in the store, where they are likely to buy non-sale items.

Hear that music? Studies show that slow music makes people shop leisurely and spend more. Loud music hurries them through the store and doesn't affect sales. Classical music encourages more expensive purchases.

What is Short Selling?

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15 Comments

After what they did to me and what I am finding out looks like they did to hundreds if not thousands of individuals Best Buy should be put out of business.

Two months ago I brought my computer into Best Buy to have a power supply replaced. For some reason they never explained they wiped out my hard drive. It contained thousands of files and thousands and thousands of hours of work including accounting files from a business I run, my PhD dissertation and four chapters of a new book I am writing. All gone, along with all the programs worth thousands of dollars.

When I discovered this I brought the computer back to Best Buy. They actually tried to blame me for their wiping it out. Their argument was that for a $150 they would have backed up my data before working on my computer. When I indicated all I wanted was for them to replace the power supply they indicated they would try to recover the data, but not the programs and that would be my problem. After a few more weeks they indicated they could not retrieve the data in a usable format and it was my problem from there.

I contacted the corporate office in Minnesota and they were even more useless and unprofessional. I never got to talk to any one of any relevance and only ended up communicating with someone named Daniel Saunders who indicated he was the ultimate decision maker. I asked how close he was to the CEO and how the CEO could make over $13 million in the previous year with the problems they were causing as an organization. After going back and forth he indicated the paperwork we signed basically allowed them to do anything, including wipe out the hard drive with no consequences or obligation to fix anything and they would not do anything further.

They have cost me thousands and thousands of hours of work. Thousands of files are lost. Thousands of dollars in programs including not only popular programs like Microsoft Office, but also programs that are no longer in existence and cannot be purchased that were used for the files I had with hundreds of thousands of business records in them.

They treat it like it is nothing and have treated me very poorly. I have asked repeatedly for help and they have refused. Since this happened to me I have found hundreds of other postings on the internet where this has happened to individuals due to the negligence of Best Buy.

Simply doing a Google Search on "Problems with Best Buy" brings up over 307, 000,000 items. Including a number of negative articles by publications such as; Forbes, WSJ, and Business Week. I wish I would have know this before going to Best Buy. Had I known. I would never have gone there.

When I told Best Buy that if they did not fix my computer and get me files and programs back I would get the word out about the problems with the hope of not only putting the Melrose Park IL store out of business, but the entire corporation they laughed.

When will retailers give us the same tools that we have online (reviews, other customers bought, top sellers, mos reviewed, price drop and more) in front of our very eyes?

When I walk into Best Buy or another retailer, I want to see an end cap that says "These are the top purchased on Amazon.com, and ours is $1 cheaper and you can take it home now".

Unfortunately, you don't get that. You get a shelf full of 1000 items and you are not sure what to buy. So, you head to Amazon.com, do some reasearch, read reviews, look for the top selling item and pick it up - regardless of price.

Just my two cents, but you don't want to take my advice, since I am only a consumer, worked in retail and customer service for over 20 years - and am not some Suit working behind a desk.

One only needs to study the demise of BlockBuster to figure it out. /sigh

Why are they not getting rid of their CEO, fire all Management in each store and start fresh with new people for those positions? Sitting around wasting time is no answer. If I were a stockholder I would be demandng action at once and the starts at the top, get rid of the CEO.

Not really the stores have gotten bad, lazy, slovenly and poor management and prices are too high. Everyone has been going to other places for what they want, places with excellent help, better prices and people who are trained right and can answer all questions consumers have. The Roseville, Mich. store has bad service and poor help and the management there is terrible, may be the worst I have ever seen.

The only reason is doing any good at all is because most of the other brick and mortar electronics stores have ceased to exist.They drove the competition away then jacked up their prices because there wasn't anyone left but they didn't count on Wally World taking up the slack.These days it doesn't pay to buy expensive electronics because they will be obsolete in a couple a year or two anyway.If your going to buy the same garbage you might as well take advantage of the cheaper prices at Wally World and the same goes for appliances.Most of the few times i have been to BB i have walked out empty handed because i knew i could get an almost identical for less elswhere and with better service.

I bought a computer long time ago. It cost more than $2,000. There was a problem with it. I showed them the problem, I have to deal with their Geek Squad. Being a woman think that I don't know anything about computer. I know a lot more than their squad. They gave me a hard time, took more than 2 hours waiting for resolution. They offered me an exchange for another PC and I refused, I don't want to waste another 2 hours or more if this new PC have another problem. After that long wait, I don't want to buy anything from them anymore. I prefer Frys Electronic, they handle all reasonable complaint to my satisfaction and most of the time I can get free stuff too thru their rebate programs. All rebates are handle well as long as you follow the instructions.